"New proposals have created challenges," United States Trade Representative Robert Lighthizer (right), Canadian Foreign Affairs Minister Chrystia Freeland (center) and Mexican Secretary of the Economy Ildefonso Guajardo said in the joint statement. | Lars Hagberg/AFP/Getty Images

NAFTA talks hit impasse as U.S. slams trading partners

Mexico, Canada and U.S. agree to delay next set of talks as a testy round wraps up.

President Donald Trump’s promise to renegotiate NAFTA suffered a major setback Tuesday as Canada and Mexico aligned to block some of the most controversial U.S. proposals and the top U.S. trade negotiator accused its partner nations of being obstructionist and unwilling to negotiate.

If all parties become entrenched in their positions, Trump has vowed to withdraw from the 23-year-old agreement altogether. That would usher in the new isolationist era that he has long threatened, potentially endangering tens of thousands of American jobs that depend on cross-border agreements for everything from manufacturing automobiles to the export of beef.

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The fourth round of negotiations wrapped up in the Washington area on Tuesday, and officials made clear they were at an impasse on a number of changes specifically sought by the Trump administration that dovetail with its “America First” agenda.

As a result, Canada, Mexico and the United States have agreed to delay their next round of talks by nearly a month, retreating to their respective capitals to work out "challenges" and "significant conceptual gaps among the parties" before meeting again on Nov. 17 in Mexico. Chief negotiators are then planning to meet in Washington in December, and additional rounds will be scheduled through the first quarter of 2018.

"Frankly, I am surprised and disappointed by the resistance to change from our negotiating partners," U.S. Trade Representative Robert Lighthizer told reporters at a closing press briefing, as he stood at a lectern between Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo. "As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits."

The delay comes at the close of a fourth round of talks that saw repeated rejections from Canada and Mexico of U.S. proposals regarding provisions on sectors such as automobiles, dairy and seasonal produce. While both Mexico and Canada expressed a willingness to remain at the negotiating table as long as talks continue, they also remained steadfast in their opposition to proposals that Washington has indicated are top priorities.

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"We must understand that we all have limits," Guajardo said. "Despite the recurring differences, we must ensure that decisions we make today do not come back to haunt us tomorrow."

Reaching an agreement that benefited all three countries is still an "absolutely achievable" goal, Freeland said, but "that cannot be achieved with a winner-take-all mindset.”

The divide has left open the question of whether the U.S. actually wants to revamp the deal or would prefer to force its demise by pushing near-impossible demands it knows neither Canada nor Mexico will ever accept.

On Capitol Hill, some aides are growing increasingly concerned that the Trump administration has not fully considered the political and economic effects either of withdrawal or of some of its more extreme proposals.“

The debate is, is it a negotiating tactic or is it a real threat?” one congressional aide said. “And you never really know the difference until it becomes an actual withdrawal.”

Mexico in particular remains concerned that the U.S.’ unspoken goal is to push a series of propositions that are unacceptable to Mexico and could drive its officials to walk away from the talks — a scenario that would allow Trump to blame them for NAFTA’s demise, as well as any political or economic ramifications that might come with it.

But in Mexico City, where national presidential elections are on the horizon next year — and where hatred of Trump is at an all-time high — the more politically savvy move is to remain engaged, continue resisting any changes it considers harmful, and prepare for a world without NAFTA.

To that end, Mexico is focusing on locking in contingency plans that involve finalizing a Trans-Pacific Partnership trade deal without the United States and boosting commercial ties with Argentina and Brazil, Guajardo told reporters Tuesday.

“Everybody in Mexico is ready for a walkout,” said Jorge Guajardo, a former Mexican ambassador who now works as a senior director at McLarty Associates in Washington. “Everybody’s just going into Plan B mode, sort of in a, ‘NAFTA is over, let’s move on and figure out what’s next.’”

All three ministers have publicly been saying that reaching a deal favorable to all three countries remains the overarching goal. But Lighthizer on Tuesday reiterated his overarching priority of reducing the trade deficit — a measure Canada has consistently criticized as a misguided way to judge the success of a trade agreement. He also stressed that he wants to eliminate “what I consider to be in many cases artificial incentives to encourage investment overseas that are not market-based.”

He lashed out against criticism to U.S. proposals that U.S. Chamber of Commerce President Tom Donohue recently called “poison pills.” Those include proposals that would require up to 50 percent of U.S. content in an automobile made in North America or having the deal automatically “sunset” after five years unless all three countries agree to keep it going.

“I’ve have some people in the business community say, ‘Goodness! Lighthizer’s putting forward proposals that the Mexicans and Canadians don’t agree with,’” he told reporters in a separate briefing on Tuesday. “I’m thinking, ‘Whoa, time out. I thought we were having a negotiation.'”

As the Chamber and other business groups have grown increasingly vocal in their fight to preserve other provisions, Lighthizer signaled that he was equally resolved to make Canada and Mexico regard the renegotiation process as more than just a modernization of the deal but rather an attempt to rebalance trade among the countries.

“I would have liked to have seen some indication of agreement that that is an objective, and at least until now we’ve seen little of that,” he said.

In one example, Lighthizer needled the U.S. business lobby over its demands that the pact retain a strong dispute mechanism that allows investors to directly sue governments for damages related to any breach of their rights under the deal. He added that it was “absurd” for businesses to want to make market-based decisions but “have political risk insurance paid for by the United States government.”

Despite Trump’s oft-repeated threats to withdraw from the deal, Lighthizer said there had been no discussion about any time frame that relates to terminating NAFTA. He added that there was no plan “beyond getting a good agreement.”

But he left open the possibility that the U.S. could still withdraw from the pact.

“If we end up not having an agreement, my guess is all three countries will do just fine,” Lighthizer said. “There’s a lot of trade. There’s a lot of reasons to trade.”